Knight & Anor v Maggioni & Ors

The issue I have to decide relates to the costs of Alan Kasmir who was the third Defendant in Part 20 proceedings brought by the Claimants. In January 2000, IFT International Inc issued proceedings against the Claimants in order to enforce personal guarantees given in its favour made by the Claimants. In around June 2003 the Claimants made a successful application to join the four Defendants (then as Part 20 Defendants) in the proceedings. Mr Alan Kasmir, a chartered accountant, the third Defendant was accordingly made a party to the proceedings. He was unable to obtain indemnity insurance cover and accordingly, acted as litigant in person from June 2003 to December 2004. In January 2004, IFT International Inc became insolvent and its claim was struck-out and the counterclaim brought by the Claimants against the four Defendants became the main action. In November 2004, Mr Kasmir acting as litigant in person, successfully applied for the disclosure of various bank statements of the Claimants and in December 2004, Notice of Discontinuance was served on him by the Claimants.

On the 4 March 2004, Mr Kasmir, who had by then instructed solicitors, served a Notice of Commencement of Assessment of Bill of Costs on the Claimants, pursuant to the Notice of Discontinuance, in the sum of £27,786. In his bill of costs, Mr Kasmir claimed that he was a fellow of the Institute of Chartered Accountants and the managing partner of KWG Limited, having practised as a chartered accountant since 1978. His remuneration as an accountant was normally calculated on the basis of an hourly charge of £200 plus VAT. Mr Kasmir stated that he had suffered financial loss, in that he had to spend time in defending the proceedings brought against him, and this led to a directly equivalent loss of income by virtue of the reduction in the number of hours he had been able to attend to his client's affairs. He said his loss could be calculated by the decreased number of hours that he had been able to attend to his client's affairs and this had been the same number of hours spent by him in defending the litigation.

The Claimants/paying parties state that Mr Kasmir has not suffered the financial loss claimed and is entitled only to costs calculated at the litigant in person rate of £9.25 pence per hour.

The detailed assessment was originally allocated to Costs Officer Martin, who made an order on the 28 July 2005, that Mr Kasmir provide a breakdown of work done by him for KWG Limited clients for the two years prior to June 2003 and for the subsequent year. He also ordered Mr Kasmir to attend at the final assessment hearing. On the 22 November 2005, Costs Officer Martin, ordered that the assessment be transferred to a Costs Judge. At a case management conference on the 19 December 2005, I directed that Mr Kasmir, file and serve a witness statement by the 31 January 2006, which was duly filed by his solicitor.

As well as having read Mr Kasmir's witness statement and the breakdown supplied in accordance with the order of Costs Officer Martin, of the 28 July 2005, I have also considered a number of lever arch files of papers lodged by Mr Kasmir's solicitors in support of Mr Kasmir's claim.

Mr Kasmir attended at the detailed Assessment Hearing. He confirmed the contents of his witness statement, namely, that he was a chartered accountant, having qualified in 1976 and had built up an accountancy practice, known as KWG Limited. He had also set up and managed a number of other successful businesses and held many directorships both executive and non-executive, which, together with the work for KWG Limited's clients, occupied the full amount of his working time. He confirmed that he worked for KWG Limited as a consultant and that his remuneration was calculated on the basis of an hourly charge of £200 plus VAT. He referred to a letter from KWG Limited dated 8 February 2005 which was exhibited to his bill of costs, which confirmed these facts, and stated that Mr Kasmir had been unable to spend as much time earning fees on behalf of KWG Limited since June 2003, as a result of the case. Accordingly, it confirmed that Mr Kasmir had consequently suffered financial loss brought about by his having to defend the case, and that his loss could be calculated by the decreased number of hours that he had been unable to attend to his client's affairs and that had been the same number of hours spent by him in defending this case. Accordingly, he has claimed his time in the bill, at the rate of £200 per hour, as equivalent to his loss.

Under cross-examination, Mr Kasmir conceded that his income from KWG Limited consisted of just part of his income. When shown a copy of the notes to the accounts of KWG Limited for the year ended 31 January 2004, which identified losses in excess of £250,000 for KWG Limited for the years ending 31 January 2003 and 31 January 2004, Mr Kasmir explained that management charges, were paid by KWG Limited to KWG Consultants which was a partnership between Mr Kasmir and Mr R Struggles. Consequently, he accepted that he only received director's fees of £5,000 from KWG Limited but the bulk of the income relating to his accountancy practice was from KWG Consultants. He could not recall their being a partnership agreement between himself and Mr Struggles, but he said that the partnership shares were divided on approximately a 60:40 basis in his favour.

Mr Kasmir also explained that he lost a substantial amount of income when IFT International Inc became insolvent. In 2004, he formed a company, KWG Trade Finance Limited, which was a continuation of his activities with IFT International Inc. He referred to a "Manhattangram" attached to his witness statement, which showed that the turnover of KWG Trade Finance Limited had doubled from 2004 to 2005 as he was then free to devote his time and energies to that business free from the burdens of litigation.

On behalf of Mr Kasmir, Mr Gold made further submissions to the effect that there was no doubt that Mr Kasmir had suffered financial loss as a result of this litigation, and that the litigant in person rate of £9.25 pence per hour could not possibly compensate him for such loss. He accepted that Mr Kasmir's financial affairs were complex but that did not mean that he did not suffer financial loss as a result of this litigation.

Ms Rylatt submitted that a litigant in person, even if a professional, cannot recover in respect of his time spent, other than on matters within his own professional expertise and requiring the attention of an expert.

In support of this submission she referred me to paragraph 39 of Sisu Capital Fund Limited and Others v Tucker and Others [2005] EWHC 2321 (CH) and to the judgment of Mr Justice Warren which stated words to that effect.

She submitted that Mr Kasmir was claiming for his time as a professional and that he had been unable to prove any financial loss. She further submitted that the case that had been presented by Mr Kasmir in the bill and in his replies to the points of dispute, was that as a result of the litigation, Mr Kasmir was unable to receive remuneration at the rate of £200 per hour from KWG Limited. However, the evidence has shown that the only income received from KWG Limited was the director's fees of £5,000 per annum. Mr Kasmir was now attempting to widen his claim to include losses relating to KWG Consultants and to KWG Trade Finance Limited. No figures or accounts or any demonstration of the specific amount of loss allegedly sustained by Mr Kasmir relating to KWG Consultants or KWG Trade Finance Limited had been submitted.

Civil Procedure Rules 1998, paragraph 48.6(3).

In my judgment, Mr Kasmir's claim for an allowance at the rate of £200 per hour for his time, is misconceived. Mr Kasmir gave his evidence in a clear and straightforward manner and with no attempt to mislead the court. However, the basis of his claim seems to me to be wrong. In the words of Mr Justice Warren set out in his judgment in Sisu Capital Fund Limited and others v Tucker and others:-

There is no doubt in my mind that Mr Kasmir spent a considerable amount of time in dealing with this claim against him. I am also satisfied that this claim caused him a considerable amount of worry and concern.

In his bill of costs, witness statement and replies to points of dispute, Mr Kasmir has based his claim on the fact that as he was so busy defending his claim, he could not earn the remuneration of £200 per hour that would have been paid to him by KWG Limited. This was not, in fact, correct as KWG Limited did not pay any income to Mr Kasmir (apart from director's fees which were unaffected) as Mr Kasmir received his accountancy income from KWG Consultants. It also became apparent that Mr Kasmir was unable to devote as much time as he would have liked to his new venture of KWG Trade Finance Limited. However, he has been unable to quantify those losses. It is not for the court to say that the litigant in person must have suffered financial loss and award him compensation. The rules require that the litigant in person must prove his financial loss. No documentary evidence has been put forward to show the extent of the loss, either to KWG Consultants or to KWG Trade Finance Limited. Consequently, Mr Kasmir must limit his loss to his pleaded claim of the loss of remuneration from KWG Limited. In my judgment it is over simplistic simply to say that Mr Kasmir spent, say 97 hours, on defending the claim made against him and that those 97 hours would have been spent earning at the rate of £200 per hour from KWG Limited. Mr Kasmir accepted that he did not work full time for KWG Limited and it is clear from his evidence that he had many other activities to which he devoted his time. Furthermore, as Mr Kasmir eventually accepted, there is always some time spent by any litigant, in preparing his claim or a defence, which is irrecoverable whether or not he instructed solicitors. To seek to recover such time at a rate of £200 per hour, is, in my judgment, wrong.

In responding to submissions made by Ms Rylatt when dealing with the assessment itself, Mr Kasmir commented by saying:

Whilst I accept that some accountants do work through their holidays, it seems to me that Mr Kasmir cannot claim a rate of £200 per hour for dealing with this preparation work during his Christmas holidays. His comment does not support, and indeed appears to contradict, his claim that instead of preparing for his defence, he would have been earning £200 an hour from KWG Limited.

Mr Gold submitted that even if I was not satisfied that £200 per hour was a reasonable rate, nevertheless, I should still allow a rate in excess of £9.25 pence per hour as clearly Mr Kasmir has suffered financial loss. I do not accept that submission. It is not for the court to set a rate for the time spent by a litigant in person. A statutory rate has been fixed at £9.25 pence per hour. If a litigant in person can prove financial loss, then he will be compensated for that loss. In this case, Mr Kasmir could well have suffered financial loss, but he has failed to quantify such financial loss with any specifity. Accordingly, in my judgment, he has failed to discharge the burden of prove that is required by CPR 48.6(4)(a) and in my judgment he is only entitled to recover for the amount of time reasonably spent by him in doing the work at the rate of £9.25 pence per hour.

The principle enunciated by Mr Justice Warren in Sisu Capital Fund Limited and Others v Tucker and Others was that a non-solicitor litigant in person, even if a professional, could not recover in respect of his time spent, other than in respect of time spent on matters within his own professional expertise and requiring the attention of an expert. There seems to me to be no suggestion in Mr Kasmir's bill of costs that any part of the work carried out by him was within his own professional expertise. Consequently, Mr Kasmir having failed to prove financial loss is limited to recover an amount for the time reasonably spent in doing the work at the rate of £9.25 pence per hour

At the conclusion of the hearing on the 13 March 2006, I indicated that I would make a decision on the document time claimed of 97 hours and 12 minutes. The only point of dispute raised with regard to this document time, was in respect of the work claimed between June 2003 and April 2004, which totalled 45 hours. Ms Rylatt's main submission was that until the documents were formally served on him in April 2004, the claim was to some extent stayed and as Mr Kasmir had already been involved in the case as a witness, much of this 45 hours was unnecessary. She further referred to the fact that in May 2004, Mr Casmir was claiming he spent a further 22 hours in connection with the preparation and drafting of his defence and, therefore, there must be some element of duplication.

I reject Ms Rylatt's submission that it was not necessary to do the bulk of the work prior to the service of defence. However, I do believe that there has been some duplication with regards to the 30 hours claimed in December 2003, for reviewing the files and defence documents and own files with the preparation of the drafting of what was, eventually, a six page defence. I, therefore, propose making a reduction in the total document time of 7 hours 12 minutes making a total allowance for documents of 90 hours.